1 September 2020

The Rule Of Law Debate - Can Germany Get Hungary off the Hook?

"'Rule of Law' has become the battle cry of our times in the arena of European politics. Accompanied by spectacular rhetorical theatrics of leading politicians whenever the media are around, the 'RoL', as it is often abbreviated, looks set to become the object of new EU rules aiming to discipline wayward member states. The whole debate has been hugely divisive, and somewhat of a burden for all involved. Practically-minded politicians are wondering how the whole thing could be put to rest – but without appearing to do so."

Article 7 procedures, “Rule of Law Mechanism”, even a new “Article 19 Mechanism” – the European Union’s debate about the Rule of Law is reaching boiling point. But behind the scenes, the aim may well be to cool things down, rather than increase the heat.

Rule of Law” has become the battle cry of our times in the arena of European politics. Accompanied by spectacular rhetorical theatrics of leading politicians whenever the media are around, the “RoL”, as it is often abbreviated, looks set to become the object of new EU rules aiming to discipline wayward member states. The whole debate has been hugely divisive, and somewhat of a burden for all involved. Practically-minded politicians are wondering how the whole thing could be put to rest – but without appearing to do so. The solution may well be something that looks, sounds and feels like stricter rules, but in reality does not amount to much.

 

THE 21 JULY COMPROMISE AND WHAT IT MEANS

 

An agreement in the European Council on 21 July, combining the new 7 year EU budget (Multiannual Financial Framework, or MFF) with vast sums of extra money to soften the economic fallout of the Coronavirus crisis (“Next Generation Fund”, or NGF) was reached only after ferocious debates between proponents and opponents of stringent RoL conditions for the disbursement of this bonanza: almost two trillion euros in total.

In essence this fight was about whether or not to move a big step in the direction of a “Transfer Union” or, to put it more radically, a de facto European Federal State. The Next Generation Fund introduces, for the first time, common debts for the EU as such. This is to be an exception, but some observers suspect that instead it will set a precedent. The EU will take up loans on international markets (750 billion euros), to be distributed among member states, a lot of it (390 billion euros) as a gift. Member states will guarantee these loans. A nebulously worded “conditionality”, somehow connected to the “Rule of Law”, is meant to prevent abuse.

Will the increased financial weight of the EU, combined with stricter rules, limit the freedom of member states to shape their own destiny, as expressed by the will of voters? It will depend on the nature of the new “conditionality”. Things will become clearer when the EU council returns to the matter in September. The conclusions of the Brussels summit contain language mentioning the respect for the Rule of Law as a fundamental value, and stating that a “conditionality regime” would be introduced for the disbursement and use of Next Generation Fund and Multiannual Financial Framework money. It sounded like a potential straightjacket for countries accused of disregarding the Rule of Law.

But when, during the summit, Hungary’s Prime Minister Viktor Orban went on the record with saying that countries that do not respect the Rule of Law should be kicked out of the EU, one could sense the ground was shifting. The whole debate had been directed mainly against Hungary and Poland. Both countries had refused any semblance of “Rule of Law” conditions. For Hungary to suddenly come out as the champion of the cause could only mean one thing: that a formula had been found to maintain RoL-appearances, while at the same time eliminating any real danger of establishing a “weaponised” mechanism that could be used to apply political pressure.

No coincidence perhaps that Orban mentioned French President Emmanuel Macron in his statement (“Macron is right”). One high-ranking source has told this author that Macron himself (as well as German Chancellor Angela Merkel) was instrumental in finding a solution that was acceptable to Hungary and Poland (while fiercely attacking them for the sake of political theatre).

So, what compromise? Hungary’s Minister of Justice Judit Varga offered her interpretation in a conversation with this author: “One needs to read the text closely – points 22 and 23 of the ‘Conclusions’”, she pointed out. “It says that member states greatly value the protection of the financial interests of the EU. That is one sentence. Member states also stress the importance of the Rule of Law as a central value. That is the second sentence. Then comes another one. In it, a conditionality regime is introduced to protect the EU budget.” Varga calls attention to the fact that “these are three different sentences, in two different points”. The “conditionality”, in her interpretation, does not refer to the Rule of Law as such, but is “of a financial nature”.

The reference to RoL in the text is understood by Ms Varga to mean that the budget-related conditionality must not contradict EU fundamental rights. She goes on to say that the European Court of Justice (ECJ) “has, in its decisions, identified legal certainty, proportionality, non-retroactivity and non-discrimination as such fundamental principles”.

In September, the European Council will convene again to define criteria and sanctions regarding the “conditionality”. Ms Varga foresees fierce debates yet again, but that in the end, there will be a text with language expressing respect for fundamental values, but a criteria system for actual sanctions that will be purely technical and financial.

 

AN “ART. 19 MECHANISM?”

 

Such a solution is sure to be challenged in the European parliament, which must vote on the Next Generation Fund/Multiannual Financial Framework package. Deputies have already directed heavy criticism at the 21 July compromise. To counter such accusations, it would be no surprise if a new element were introduced into the debate, to create the impression of stricter control. The liberal-leaning think tank “European Stability Initiative” (ESI) has come up with such a proposal. Its founder and chief Gerald Knaus calls it an “Article 19 mechanism”. Article 19 of the EU treaty covers Rule of Law principles.

It was European Stability Initiative and Knaus who came up with the idea for the “refugee pact” between Turkey and the EU in 2016.

Now, the idea is to make the European Court of Justice the final arbiter. “If the European Court of Justice decides against a member state in a matter referring to Art. 19 of the Treaty on European Union (TEU), and the member state does not implement that decision, then EU funds should be completely cut off”, Knaus said in a conversation with this author. The member state could only avert the punishment if it were able to muster a “reverse majority” in the European Council.

Ms Varga can see the logic of such a rule: At least there would be a tangible legal principle, not nebulous language referring to “general deficiencies” in the area of fundamental rights when calling for sanctions against a member state. Hungary, she points out, has never failed to implement a decision of the European Court of Justice. So this would be something that would probably not hurt Hungary.

However, the European Stability Initiative proposal also sticks to the formula of sanctions in the case of “general deficiencies”. “General deficiencies” are at the core of current Article 7 procedures against Hungary. The term also appears in the Commission’s proposal for the planned RoL mechanism regarding the Next Generation Fund and Multiannual Financial Framework, but not in the text of the 21 July compromise. The term “general deficiencies” is political poison – it can be made to mean anything.

The European Stability Initiative idea does not aim to replace that formula with an “Art. 19 mechanism”, it would just add such a mechanism to sanctions related to “general deficiencies”.

If adopted in some form, and if the European Council, where every country can veto any decision, avoids language referring to “general deficiencies”, then this could lead to a dual sanctions regime: technical fiscal and financial controls with fines in case of violations, and a withdrawal of EU funds in case of non-compliance with a European Court of Justice decision referring to a matter related to Art. 19 of the Treaty on European Union.

Hungary could probably live with that. A normal fiscal sanctions regime and (maybe) an Art. 19-mechanism would not be a problem if Hungary continues, as it has, to implement European Court of Justice decisions.

That leaves us with the ongoing Art. 7-procedure against Hungary related to alleged “general deficiencies”. Prime Minister Orban has claimed that German Chancellor Angela Merkel “promised to close the Art. 7 procedure before the end of the German EU Presidency”. That means, before the end of the year. Minister Judit Varga added that obviously this only means the Germans will use their influence to bring the matter to an end.

How? By putting it to a vote in the European Council. A 4/5 majority would be needed there to decide that EU fundamental rights are in grave danger in Hungary. If a vote does not get that majority, the procedure should be over.

Merkel’s speaker Steffen Seibert has said that “Hungary has agreed to create the conditions that would make it possible” to bring the procedure to a conclusion.

Hungarian government sources have told this author that the government has already given enough: it agreed to the Brussels compromise.

If all of this or most of this comes to happen – a Rule of Law mechanism, centred on fiscal control, that would not hurt Hungary, and an end to the Art 7 procedure – this would be tantamount to Germany letting Hungary off the RoL hook.

Several sources have told this author that Merkel was instrumental in crafting the Brussels compromise. And the German EU presidency can indeed lead the Art. 7 procedure to a vote and thus to a conclusion.

 

WHY GERMANY CAN AFFORD TO BE LENIENT

 

The political will to do that depends in no small measure on what is happening in German domestic politics. Less than a year ago, Germany looked set to veer to the left, with elections set for 2021 and Chancellor Merkel insisting that she would not be a candidate again. Christian Democrats (CDU/CSU) were struggling to hold on to shrinking voter sympathies below 30 per cent of the electorate. The Greens were on a roll, even overtaking CDU/CSU in one poll last October. The Social Democrats (SPD), in a ruling coalition with CDU/CSU, were in free fall and experimenting with leftwing sloganeering to regain some profile. A repeat of the “Groko”, the ruling coalition, looked nearly impossible. The next German government, it seemed, would be more leftwing than the current one. And “more leftwing” might well mean more problems between Berlin and Budapest.

The COVID-19 epidemic changed all that. It robbed the Greens of their main theme, climate change. Germans suddenly realised there were more immediate dangers, closer to home. They flocked back en masse to the Christian Democrats, who have managed the crisis fairly well. The political landscape now looks like it has always looked: a crushingly dominant CDU/CSU at an average of 36 per cent or more in the polls, the Greens down to 17 per cent (from 28), and the SPD stabilised at also 17 per cent. The “Groko” can thus hope for a repeat. The SPD has stepped back from the intellectual brink on the far left side of the political spectrum and made Olaf Scholz, a pragmatist, its candidate for Chancellor.

However, the Christian Democrats could, at this point, also form a coalition with the Greens.

But can Merkel leave the arena without collapsing her party? It must choose a successor to current CDU-Chief Annegret Kramp-Karrenbauer in December, and whoever that will be should normally also become the candidate for Chancellor. Armin Laschet, Prime Minister of the most populous Bundesland (federal state) North Rhine-Westphalia, took an early lead but then fumbled and stumbled in the COVID-19 crisis and has lost sympathies. Friedrich Merz, a favourite of conservatives, holds no office and faded during the epidemic. Health Minister Jens Spahn, however, has been able to put on a good show and is now a rising star.

Then there is Markus Soder, Prime Minister of Bavaria. His main drawback is that he belongs to the wrong party: the smaller CSU, present only in Bavaria. The CDU has traditionally only agreed to a common candidate from the CSU when it was deeply dissatisfied with its own leadership (in 1980 and 2002). It never worked. Germany has never had a CSU chancellor. Still, polls show Soder to be the strongest man in the arena.

Be that as it may, for Hungary the good news is that Christian Democrats are strong again in Germany, and will presumably govern again. That means they do not need to pander to leftwing ideologists all that much and can afford to try to solve the RoL impasse in the EU – and then return to what matters most, economic cooperation.

 




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